Alibaba Group Holding Limited

Alibaba reported total revenue of RMB 243.4 billion. Excluding Sun Art and Intime, revenue would have grown 11% year over year. Total adjusted EBITA decreased 84% because of strategic investments in technology, quick commerce and user experience. GAAP net income was RMB 23.5 billion, up 96% year over year, helped by mark-to-market gains and prior-year disposal losses. Operating cash flow was an inflow of RMB 9.4 billion, while free cash flow was an outflow of RMB 17.3 billion. Net cash was approximately USD 38 billion, or about USD 59 billion excluding debt with maturities beyond 5 years. In segment detail, China E-commerce Group revenue was RMB 122 billion, up 6%; quick commerce revenue was RMB 20 billion, up 57%; Cloud external revenue grew 40%; and AI-related product revenue was RMB 9 billion with an annual run rate of RMB 36 billion. For guidance/commentary, management said model and application services ARR, including Model Studio, is expected to surpass RMB 10 billion in the June quarter and RMB 30 billion by year-end. Eddie Wu said Cloud external revenue growth should keep accelerating beyond 40% over the coming quarters, and he expects AI-related product revenue to cross 50% of Cloud external revenue in about one year. Quick commerce UE is expected to turn positive by the end of fiscal 2027. Management also said cloud gross margin should improve meaningfully over the next 2 to 3 years, with some improvement visible in the next 1 to 2 quarters.

Eddie Wu framed the quarter as a turning point where Alibaba’s investments in AI+Cloud and consumption are translating into tangible results. He emphasized that AI commercialization has moved beyond the initial investment phase, with model and application services scaling quickly and Cloud growth accelerating. His tone was confident and long-term oriented, repeatedly stressing that Alibaba has a full-stack AI advantage and that the company is at a pivotal juncture where technology investment is beginning to pay off commercially.

Toby Xu highlighted the hard numbers behind the quarter: RMB 243.4 billion of revenue, adjusted EBITA down 84%, GAAP net income up 96% to RMB 23.5 billion, operating cash flow of RMB 9.4 billion, and free cash flow outflow of RMB 17.3 billion. He said the negative free cash flow was mainly driven by heavy AI investment, while the balance sheet remained strong with about USD 38 billion in net cash, or about USD 59 billion excluding debt with maturities beyond 5 years. On the business mix, he pointed to China e-commerce revenue of RMB 122 billion, quick commerce revenue up 57% to RMB 20 billion, and cloud AI revenue at RMB 9 billion annualizing to RMB 36 billion.

Analysts focused on the economics of Alibaba’s AI push, asking how much MaaS revenue comes from proprietary Qwen versus third-party models and whether higher token prices would help margins. Management said most MaaS revenue currently comes from Alibaba’s own models, though the platform remains open to third-party models, and argued that rising inference demand and pricing should be positive for overall gross profit margin. Questions also centered on ROI, capex, and cash burn: management said the AI spending is deliberate, the opportunity window is the next 2 years, and the return case is clearest over a 3- to 5-year horizon. On quick commerce, management said order volume was 2.7x last year’s level, UE is improving, and UE should turn positive by the end of fiscal 2027.